Refer to Exhibit 4. If there is no tax placed on the produced in this market consumer surplus is the area ?
Correct answer: C. A + B + E
- A. C + D + F
- B. A
- C. A + B + E
- D. D + C + B
Explanation
Without a tax, consumers pay the single equilibrium price, so consumer surplus includes all the area below demand and above that price, namely A + B + E.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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